IMF: Slow and steady growth worthwhile for China

An IMF expert has said that sustainable growth in China would be worth a slower rate of expansion.

Concern has emerged in global markets about a potential slowdown in China, and what easing demand in one of the world’s biggest economies could mean for the rest of the world. But according to the International Monetary Fund (IMF), slower growth would be worthwhile to ensure that Chinese expansion is sustainable.

State news provider Xinhua reports that Gerry Rice, IMF spokesperson, said that slower growth in the short-term would not necessarily be a bad thing.

If it allows for reforms and adjustments that lead to more sustainable future growth and higher income in the long term, he added, slower growth would actually be worthwhile.

Overall the IMF is very positive about China’s prospects. Changyong Rhee, director of Asia-Pacific at the organisation, told press in Manila this week that growth in China is likely to remain “well above” seven per cent in 2015. The remarks suggested that IMF might even revise its growth forecast upwards, from the 7.1 per cent it predicted in July.

Much of the worry about China’s prospects has related to its property market, where prices, sales and new construction are all declining. Related industries are feeling the pinch and it is feared it could become a drag on growth. But Mr Rhee seemed relatively unconcerned, explaining that the IMF expects a “gradual adjustment” instead of a collapse in the market.

IMF has been calling for a slower and steadier approach to growth in China for some time.

In July’s report, it argued that China needs to implement the reform agenda promised by the government and deal with some of its key vulnerabilities to make sure that it develops on a more stable and sustainable footing.

There are plenty of tools Beijing could employ to keep China growing, including stimulus measures for the property market and continuing with its reform plans. But at the same time, a slight slowdown shouldn’t be taken as a sign that the nation is at risk of economic turmoil. In fact, it could be exactly what China needs.